Stafford loan interest rates for undergraduates increased this school year, but the 6.8 percent loan rate is off the table — for now.
President Barack Obama signed a compromise on student loans to prevent Stafford loan interest rates from doubling to 6.8 percent for the 2013-14 school year. Instead, the interest rate for undergraduate loans will be 3.86 percent.
Loan rates will also be determined by the current economic climate instead of based on the Higher Education Act. At Ohio University, more than 18,000 students receive a Stafford loan.
“There was so much uncertainty throughout the summer when we were dealing with students and families who were trying to make very important decisions,” said Valerie Miller, director of student financial aid and scholarships.
Although the rate was determined in early August, that rate will be retroactive to July 1 — the day Congress will also now determine loan rates.
“These last couple years, we were right up to the last days in June, sometimes the early days of July, finding out what the rates were,” Miller said. “Being expected to make a decision about a commitment to a loan without the full picture in front of them, it was just an unfair situation.”
Once set, interest rates cannot change for the duration of the loan.
“We just felt like it was best to share the full picture, but certainly students and families have been pleased that Congress was able to come together and come up with a plan that results in a known future for the loan progress as far as student rate loans go,” Miller said.
Stafford loan interest rates are capped at about 8 percent for undergraduates and 9 percent for graduates but even if the rates were to change, it wouldn’t have much of an effect on students’ borrowing, said Allesandra Lanza, director of corporate public relations for American Student Assistance, a nonprofit organization that provides financial advice on student loans.
Although Congress determined the market-based method is effective to determine student loan interest rates, Student Assistance will continue to analyze the system.
“The question then becomes how much should the government be profiting from student loans,” Lanza said. “I think it’s a discussion that still needs to be had.”
Anne Marie Esposito, a freshman studying forensic chemistry, said she is a little worried about rising loan rates, but she understands the logic behind tying rates to the economy’s condition.
“I think it’s good because if the market’s doing better generally people are doing better,” she said.
The compromise also set Stafford loan rates for graduate students at 5.4 percent and Parent PLUS loans, money parents can borrow to pay for their child’s education, at 6.4 percent.
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@DanielleRose84
